Forum upbeat on Japan-ASEAN FTA but hit closed farm sector

Japan’s recent conclusion of free-trade talks with the Association of Southeast Asian Nations signals Tokyo’s continued engagement with the region, four journalists from ASEAN member states told a recent symposium in the capital.

However, some also expressed frustration over the slow progress in the opening of Japan’s agricultural market — an issue that continues to overshadow Tokyo’s trade talks with other potential partners.

The four journalists, from Singapore, Thailand, Malaysia and Indonesia, were taking part in the Dec. 13 symposium organized by Keizai Koho Center under the theme “Toward a new framework in East Asia.”

2007 saw progress in Japan’s free-trade agreement talks with Southeast Asian countries. Following the conclusion of FTAs with key ASEAN economies, Tokyo in November wrapped up its negotiations with an economic partnership agreement with the 10-member regional bloc itself, aimed at further boosting bilateral trade and investment.

The ASEAN-Japan Comprehensive Economic Partnership Agreement, which is not only a free-trade agreement for goods but also covers services and investment, is set to be formally signed early next year after further fine-tuning of the wording.

“The EPA is a reflection of Japan’s past engagement with ASEAN over past decades and confirms and seals its continued engagement with ASEAN for the future,” said Ignatinus Low, editor on the money desk of The Straits Times in Singapore.

Japan is already ASEAN’s second-largest trading partner and has invested more than $100 billion in the region since the founding of the bloc in 1957, Low said. Japan’s economic assistance to ASEAN countries today accounts for 30 percent of the nation’s overseas aid, he added.

Low said the upcoming Japan-ASEAN pact, in addition to those the bloc already concluded with China and South Korea, will also help cement economic cooperation within ASEAN itself.

Before the 1997 Asian financial crisis, ASEAN countries were essentially “in competition with each other” as exporters and recipients of foreign direct investments, Low said. Even after the crisis, many ASEAN members were too busy dealing with their own financial and economic problems to discuss real economic cooperation within the bloc, he said.

However, the need for cooperation within ASEAN as an economic grouping “has never been more urgent” today because of the rise of China as another powerhouse in East Asia, he said, noting that ASEAN — if combined — boasts a market of 500 million increasingly affluent consumers.

Under the Japan-ASEAN accord, Tokyo will be obliged to eliminate tariffs on 90 percent of imports from ASEAN by value immediately after it takes effect, while the bloc’s six major economies — Singapore, Thailand, Indonesia, Malaysia, the Philippines and Brunei — will repeal tariffs on 90 percent of imports from Japan within 10 years in terms of both value and volume. The other four ASEAN members were given a more gradual timetable for tariff cuts.

But rice and other farm products that are politically sensitive in Japan were not included.

Some of the panelists noted that the significance of closer Japan-ASEAN cooperation through EPAs goes beyond mere tariff cuts.

Dadan Wijaksana, deputy business editor of Jakarta Post, said the bilateral pact Indonesia signed with Japan this year covers nontariff issues that will boost Japanese cooperation in his country’s human resources development, building of parts and components industries for the auto and electronics sectors, as well as technical support for small and medium-size industries.

Low of The Straits Times also said the Japan-ASEAN pact “includes many softer elements” of economic integration, including youth exchanges that “will build a good foundation for better economic cooperation 20 to 30 years from now.”

Still, others expressed frustration over the lack of progress in farm trade liberalization on Japan’s part.

The opening of Japan’s rice market was removed from the agenda in the bilateral FTA talks with Thailand, even though Bangkok had looked forward to liberalization in the sector, said Nophakhun Limsamarnphun, Sunday editor at The Nation newspaper.

He voiced doubt that any progress will be achieved in liberalizing Japan’s farm sector in the foreseeable future, especially given that the ruling Liberal Democratic Party lost many rural votes in the House of Councilors election in July.

Farmers had been traditional LDP supporters, but they turned on the party amid an increasing widening in the rural-urban economic gap as their state subsidies under LDP rule declined in recent years.

Siew Lian Lee, news editor on the features desk of The New Straits Times in Malaysia, said Japan’s reluctance to open up its agricultural market is an indication that Japanese consumers are prepared to pay the price for expensive farm products.

Whether to keep funding this reluctance with the nation’s wealth is a choice that will be up to Japanese consumers, she said.

Rinji Takeoka, senior editor of the Asia and Oceania news department of the Nikkei business daily, acknowledged that the Japan-ASEAN pact left much to be desired on both sides.

Japan has yet to deliver a clear and convincing message to its people about how it considers its strategy on pushing for FTAs in relation to its agricultural sector, said Takeoka, who served as moderator in the symposium.

In this sense, the ongoing FTA talks with Australia will be a key test of Japan’s policy, he added.